Trade Data show China’s Credit Bubble is Bursting, USA to See Deflationary Effects – Global Depression Ahead?
By: GoldCore
GoldSeek.com
Monday, 9 February 2015
– Chinese imports, primarily of raw materials, crashed 19.9% in January
– Exports fall 3.3% against expectations of 6.3% rise
– Total Chinese debt rose from $7.4 trillion in 2007 to $28.2 trillion in 2014
– Capital outflows last quarter were the highest on record
– China may devalue yuan to boost exports
– Currency depreciation by worlds biggest exporter may trigger global deflation and depression
China’s debt-driven economy and monumentally wasteful building boom which has created entire cities with no inhabitants looks set to unwind as figures show that Chinese imports of raw materials continue to decline.
Imports fell 19.9% year on year in January. While such a dramatic slump can largely be explained by considerably lower prices for raw materials the data shows that imports are down in terms of volume also.
Iron ore imports fell by 9.4% in volume (YoY) while coal imports fell almost 40% by volume and oil by 7.9% between December and January. Imports into China have been declining every month since October.
Last year the Chinese Lunar New Year fell in January which caused factories to close for a week. This year, Chinese New Year falls this month. So these figures are particularly shocking given that industrial capacity was roughly 25% higher this January than in January 2014.
Meanwhile, exports also fell 3.3%. A Reuters poll of analysts had expected a 6.3% increase.
China is showing signs of being “maxed out” on credit. In 2001, total Chinese debt was $2.1 trillion. By 2007 it had swelled to $7.4 trillion. By last year it had bloated to $28.2 trillion. In the same period (2007 – 2014) China’s GDP grew only $5 trillion.
So, as David Stockman points out in his excellent article “China’s Monumental Debt Trap – Why It Will Rock The Global Economy”, “The China Ponzi took on $4 of debt for every new dollar of freshly constructed GDP”.
China’s new leadership is trying to get China’s reckless borrowing under control. The policies by which this might be achieved are, unfortunately, diametrically opposed to the only policies that central planners believe can stimulate an economy.
From Bloomberg:
“As China grapples with its slowest growth in 24 years, President Xi Jinping is under pressure to stimulate the economy. Yet that would run afoul of his pledges to curb runaway debt and credit (the latter jumped about $20 trillion from 2009 to 2014).”
The Rest…HERE
